CBN Orders Banks With Huge Bad Loans To Stop Dividend Payment

Yemisi Izuora 

Henceforth Deposit Money Banks, DMB, and Discount Houses with record of huge bad loans and low capital base would not be allowed to pay dividends to their shareholders.

This is due to the rising non-performing loans and the need to stop further erosion of the capital base of the banks and discount houses, the Central Bank of Nigeria , CBN which gave the order explained.

The directive is coming barely a week to the release of the 2017 financial year’s annual reports by commercial banks and discount houses in the country.

The development has dashed the hope of many shareholders as a number of the banks will be affected by the directive and consequently unable to pay dividends.

The CBN said the move was aimed at stemming the tide of rising non-performing loans and the consequent weakening and erosion of the banks’ capital base.

The directive was handed down in a letter dated January 31, 2018.

In the letter to the banks and discount houses, which was signed by the Director, Banking Supervision Department, CBN, Ahmad Abdullahi, the regulator said it had observed that rather than grow their capital with retaining earnings, some banks were paying out a greater proportion of their profits, irrespective of their risk profile and the need to build resilience through adequate capital buffers. 

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